Hiroto Saikawa's departure only adds to Nissan's uncertainty

Nissan Motor Co. has announced that CEO Hiroto Saikawa will step down next Monday, which will likely add another layer of dark clouds over the viability of the Yokohama-based automaker already mired in low profits, waning trust in corporate governance and a shaky alliance with French Renault SA.

According to Nissan directors who briefed reporters after a board meeting Monday, the board asked Saikawa to resign and he agreed.

The company will officially name a new CEO by the end of October while Yasuhiro Yamauchi, current chief operating officer, will hold the CEO role until then.

The candidates will include non-Japanese and female business people, they said.

“I was thinking when I should pass the torch and had various timings in mind,” Saikawa said.

Calling this “the earliest timing,” he apologized for leaving the post given that Nissan still faces mounting problems.

Indeed, whoever replaces him will face the daunting tasks of keeping in step with Renault and turning around Nissan’s sluggish sales numbers, experts said.

“Anybody who takes that job should have a big glass of whiskey beforehand because it’s going to be an almost impossible job,” said Stephen Givens, a Tokyo-based corporate lawyer.

Saikawa’s exit appears to have been accelerated by a revelation from an internal investigation, concluded last week, that an equity-linked remuneration program operated by the automaker had overpaid him.

According to media reports, he had received tens of millions of yen in extra payments in 2013 via what was known as a stock appreciation rights program. Directors would be eligible to receive a bonus had the share price risen.

He denied that he had ordered the payment. The company supposedly determined it did not believe that he had broken the law.

The Nikkei financial newspaper reported Sunday evening that Saikawa told his confidants that he would be stepping down as chief executive officer following his admission that he had received excessive compensation.

He had told Kyodo News and other media outlets Monday morning that he intends to hand over his role to the next generation but did not elaborate on when he would do so.

“I was expecting that Mr. Saikawa would become the CEO possessing leadership to untangle a twist in capital (with Renault),” Masayuki Kubota, chief strategist at Rakuten Securities, said before the resignation announcement was made. “But if he were to step down because of (the overcompensation issue), it is unlikely that there will be a leader who has both charisma and leadership, and is capable of breaking off a twist in capital with Renault correctly.”

At a shareholders meeting earlier this year, Saikawa vowed to restructure Nissan and normalize relations with Renault.

In reality, Saikawa was already a lame duck CEO. His grip on power continued to decline as Nissan struggled to reverse lackluster performance.

Nissan in July reported a whopping 99percent decline in operating profit in the first quarter of this business year and announced 12,500 jobs will be cut by March 2023.

Relations with Renault have been bumpy. Renault reportedly proposed a merger with Nissan, which the Japanese automaker declined out of fear it would be forced to surrender its autonomy. Even though Renault has a 43 percent stake in Nissan, the Japanese carmaker is the bigger partner by sales. It owns 15 percent of Renault, yet has no voting rights.

Kubota identified Nissan as having two significant problems relating to Renault: the reverse of power dynamics between a parent and a subsidiary company and their ineffective capital ties.

Even though Renault provided capital to Nissan in times of crisis and became Nissan’s parent company, Nissan in general is superior in earning power and technology, Kubota pointed out.

“It is impossible to conduct comprehensive management reform if Nissan can neither dissolve its partnership with Renault nor resolve the imbalance in power between a parent company and a subsidiary company,” Kubota said.

Givens, the corporate lawyer, said it is unclear which direction Nissan is heading. Renault could either exercise its right to install a new CEO despite Nissan’s possible pushback or dissolve its alliance with Nissan.

The findings of Nissan’s internal probe, which is looking into financial misconduct allegations against former Chairman Carlos Ghosn and former Representative Director Greg Kelly, appeared to have been presented at Monday’s meeting.

Kelly accused Saikawa in a magazine interview published in June of improperly receiving ¥47 million ($443,000) in 2013.

Kelly himself is accused of conspiring with Ghosn to deliberately underreport Ghosn’s income to tax authorities.

Ghosn was arrested Nov. 19 last year after prosecutors alleged he had misled authorities in reporting his income and misappropriated company money for personal use. Both Ghosn and Kelly deny any wrongdoing.

Saikawa was among a handful of executives who were part of a separate internal probe that led to the duo’s ousting. While Saikawa has denied any knowledge of their alleged misconduct prior to the internal investigation, his explanation was met with suspicion and exposed dysfunction in Nissan’s corporate governance.

Since the scandal broke, Nissan has divided its management and audit operations to reinforce corporate governance and prevent a concentration of power, which Saikawa said Ghosn had amassed.